Choices of Deficit Financing, Saving-Investment Gap and Inflation Nexus: Evidence from Pakistan
Abstract
The study is the analysis of possible consequences of various financing options at a disaggregated level on macroeconomic variables like the savings-investment gap and the general price level to choose a less-lethal financing option. Financing from domestic sources causes an increase in the general price level except for National Saving Schemes (NSSs) and crowding out of private sector credit and investment but external financing and deficit-financed by bonds appeared free from such costs. The government of Pakistan restricts printing of money to control the rate of inflation and may improve bonds and floating debt management to avoid crowding out effect. The study suggests bonds financing or external financing as compared to any other source because domestic financing is more distortionary as compared to external financing. Therefore, the study favors external financing because it appeared non-inflationary, satisfy the savings-investment gap, overcome the issue of crowding out, and bonds financing.
Downloads
Copyright (c) 2022 Muhammad Asghar, Imran Sharif Chaudhry, Sharafat Ali
This work is licensed under a Creative Commons Attribution 4.0 International License.
JQM follows an open-access publishing policy and full text of all published articles is available free, immediately upon publication of an issue. The journal’s contents are published and distributed under the terms of the Creative Commons Attribution 4.0 International (CC-BY 4.0) license. Thus, the work submitted to the journal implies that it is original, unpublished work of the authors (neither published previously nor accepted/under consideration for publication elsewhere). On acceptance of a manuscript for publication, a corresponding author on the behalf of all co-authors of the manuscript will sign and submit a completed Copyright and Author Consent Form.
